Co-authored by Rebecca Harris
On Friday, March 5th, the World Bank convened a multi-stakeholder consultation in Washington, DC as part of a review of their Energy Strategy. More than one hundred participants from civil society, private sector, the World Bank and various international organizations attended the consultation as part of an open dialogue with the World Bank as they continue to shape their Energy Strategy Approach Paper which will guide the Bank's substantial energy investments (over $8 billion in FY 2009 alone) over the coming decade. The Bank will be holding several in-country consultations worldwide over the coming months, in addition to an on-going online consultation process. Kathy Sierra, Vice President for Sustainable Development at the World Bank, asked the group how the Bank can best provide energy access sustainably and made an appeal for suggestions of criteria to follow when faced with a need to reconcile energy poverty and climate concerns when it's not a "win-win situation." She asked that the entirety of the consultation not fixate on "the elephant in the room," referring to the proposed $3.75 billion loan to South African power utility Eskom for the construction of a 4,800MW coal-fired plant that is expected to be considered for approval by the World Bank's board in the coming weeks.
Director of Energy, Transport and Water at the World Bank, Jamal Saghir, presented an overview of the Bank's proposed energy approach, including the strategy review timeline as well as context and challenges. The presentation focused heavily on underscoring the importance of energy access, particularly within sub-Saharan Africa, perhaps more than a coincidence in the context of the upcoming controversial loan to Eskom.
As expected, Eskom was a lightning rod for criticism and concern from several attendees of the consultation. Participants questioned why the Bank would consider a loan that would build another coal plant in a middle-income country that already derives approximately 90% of its power from coal. One participant questioned how Eskom is deemed appropriate for Bank financing, as the project both fails to address energy poverty - as a result of this project, energy prices for South Africa's poor are expected to increase - as well as climate concerns associated with the construction of the world's fourth largest coal-fired power plant. He recommended that the World Bank follow its own expert panel recommendations before approving this loan. Another participant claimed that the World Bank's involvement in Eskom demonstrates a failed approach to energy and emphasized the need for decentralized projects that best serve the needs the energy impoverished.
It was also recommended that the true cost of coal production and coal-fired power, taking environmental and social externalities into account, be addressed before the Bank considers approving and funding a project such as Eskom. One participant emphasized the point that the local communities, especially the poor, don't support this project because they realize that not only will they not gain electricity access, they will jeopardize their health in the process.
Another participant questioned the World Bank's characterization of the proportion of their fossil fuel investments to renewables and raised concern around deceptively low coal numbers due to investments stemming from financial intermediaries. She noted that the Bank regularly cites GDP losses for lack of access to energy, yet does not cite a figure for GDP losses due to climate change, which other multilateral development banks, such as the Asian Development Bank, have estimated to be in the range of 4 to 7 percent!
Several participants raised the question of equitable distribution of energy benefits as well as the need for transparency in the regulatory process. A civil society representative emphasized that the World Bank should prioritize support to low income countries over middle income countries, citing, again, the Eskom project as an example, The World Bank is proposing $3.75 billion to Eskom at a time when Eskom is cutting off electricity services to its poorer neighbors, such as Mozambique. He suggested that the Bank should focus on helping such low income countries, as opposed to South Africa. In the past, the World Bank has supported projects such as natural gas export from Mozambique to Eskom, whereby Eskom then sells the resulting power back to Mozambique at high rates. The Bank should instead support countries like Mozambique in using their own resources to provide for domestic energy needs.
Another participant broached the topic of World Bank financing for large hydropower projects and noted that the impoverished rarely benefit from such projects. She highlighted the significant greenhouse gas emissions produced by dam reservoirs and noted that the changing rainfall patterns associated with climate change will further reduce hydrological viability as an energy source. She suggested that if the World Bank chooses to finance dams that they must comply with the World Commission on Dams report, a ten year old study that was funded by the World Bank though the findings have yet to be internalized and implemented.
Several participants underscored the importance of the role of policy and regulation in creating an enabling environment for leveraging the private sector investment necessary for the innovation of new, green technologies. Others raised the issue of the need for energy subsidy reform to explicitly address pricing and energy access for the poor.
Perhaps the contradictions within the Bank's Energy Strategy approach were best addressed by a civil society representative when she asked how the World Bank can claim to lead on climate on one hand and yet support the financing of some of the most polluting projects on the planet. We'll look to the Bank to address, and hopefully reconcile, such inconsistencies in the coming months.